Cutting overtime exemption could harm seniors, small-businesses

According to a study by the International Franchise Association, the U.S. Department of Labor's proposal to cut overtime exemptions, which affects hundreds of thousands of workers in the companion care industry, would significantly increase the cost of care for seniors and hamper a growing market that has created thousands of new jobs.

"This is a solution to a problem that does not exist and will only harm those who need companion care the most, our nation's seniors," says IFA President and CEO Steve Caldeira. "By requiring overtime pay for companion care workers, the Department of Labor is continuing its track record of imposing costly, burdensome and unnecessary regulations at a time when an increasing number of seniors are enjoying companion care as a cost-effective alternative to traditional care. We urge the DOL to withdraw its proposal in light of the impact this regulation will have on workers, small-business owners and clients, including many seniors in the companion care industry."

The report, Economic Impact of Eliminating the FLSA Exemption for Companionship Services, comes after a Dec. 27, 2011, Notice for Proposed Rulemaking (76 Fed. Reg. 81190) that cuts the exemption from minimum wage and overtime provisions for workers providing companionship and live-in domestic services. A comment period was initially scheduled to end Feb. 27, but after reviewing requests for an extension of up to 90 days from members of Congress and the public, the comment period was extended to Monday, March 12.

Key findings of the study show that on average the overtime worked by companion care employees in these franchise agencies is three times greater the amount than DOL's estimate, and more than 4,000 franchise businesses and nearly 340,000 companion care workers could be negatively affected by the DOL proposed rule changes. Based on the DOL's analysis, other costs are understated while the impact of price hikes on customers to account for additional overtime costs was greatly underestimated.

The study also reveals that companion care agencies anticipate 23 percent of their clients being forced to seek institutional care or "underground services" from unlicensed providers, and many seniors and other companion care recipients could be negatively impacted because of the higher fees and interruptions to their care.

"These proposed rule changes would be particularly acute for America's seniors, who may be negatively impacted due to the higher fees and changes in their daily schedules," Caldeira says.

In fact, according to a survey of franchise business owners joint by this report, 78 percent believe the DOL's proposed rule changes would have a significant impact on their businesses. Sixty-nine percent of respondents expect a significant increase in costs, and another 75 percent anticipate having to raise client fees if the DOL rules are enacted. Several companion care franchise business owners even stated specific concerns of the potential impact the DOL rules would have to their businesses if enacted.

"Surveys consistently show that 85 to 90 percent of seniors prefer to age in their homes,” says Roger Baumgart, CEO of Home Instead Inc. “Home Instead Senior Care franchisees provide services that allow many seniors to achieve this goal by keeping nonmedical home care affordable and accessible. The Department of Labor's proposed rule change jeopardizes the ability of seniors and those with disabilities to enjoy the benefits of home health care. This study is a useful tool that demonstrates the impact the proposed rule change would have on seniors and their families.”

“Home care businesses will not be able to afford to pay the overtime rates and be able to stay in business,” says Suzanne Morrison of Healthcare Advantages LLC. “Clients will suffer the most because they will not be able to have the continuity of care that is so crucial to many of our Alzheimer and dementia clients. The caregivers will not be able to make enough money to live on, so they will either leave the field or try to work for several different agencies. This is a no-win situation."

"If this rule is adopted, it will move caregivers to an unregulated 'underground' market as clients will no longer be able to pay for live-in care through a regulated agency,” says Ben Solomon of Northwest Homecare & Staffing Services. “Caregivers will lose take-home pay as clients will not be able to pay overtime – resulting in an overall loss in jobs. Finally, less taxes will be collected as more caregivers will be paid under the table and not report their income.”